Tag Archives: kenneth fisher

While I am sure many of you have heard of Philip Fisher, how many actually recognize the name Kenneth Fisher? My guess is Ken will always be hidden, to a large extent, in his father’s shadow. For us this is a good thing because his method of investing is better off largely hidden from the public eye, just as if you came across an abandoned gold mine you wouldn’t want everyone else knowing about it.

One of the reasons I decided to look into Kenneth Fisher in the first place is because I was sure that his father had taught him plenty about investing. If you can’t learn anything more from Phil, who better than his son? In fact, Forbes publishes Fisher’s stock pick performance and has shown he has beaten the S&P 500 11 out of 14 years (Fisher’s record)(full article). In addition to being an excellent investor, he is also an accomplished businessman, author, and runs his own company, Fisher Investments. On top of that, he’s a nice guy as well as a moral beacon for those of us in the business and investment world. He is also on a mission to save the redwood tree.

Kenneth Fisher was the first value investor to use P/S ratios as an analytical tool. However, instead of just casually glancing at them, Fisher used them almost religiously. Fisher, today, largely believes that his P/S ratio method may be obsolete because of its widespread use. However, given the extreme volatility of this market, as of late, I have found this method quite useful in finding undervalued companies.

In Fisher’s book, Superstocks, although he talks mainly about his P/S ratio methodology he also discusses some other important elements of successful investing. He reiterates the use of scuttlebutt, Phil Fisher’s term for talking to all parties involved with a company from the CEO down to the janitor in order to find out critical information which might influence your investment in said company. Another important element Fisher addresses is the stability of a company’s profit margin. Fisher believes a company’s profit margin should be at least 5% and should not deviate significantly from this value in the downward direction. A high stable profit margin, he believes, reflects that the management is doing its job for investors and always striving to beat competition. Fisher strongly believes management is the most important aspect of any investment, echoing his father. This belief has well-served many investors, Warren Buffet included. The bottom line, if management is not committed and shareholder-friendly, two musts, then your long-term investments are doomed to failure. He also discusses price-to-research ratios and this has helped me to identify a few stocks I would have normally written off more quickly (one that comes to mind in particular is Nanosphere).

In other writings he talks about how an investor’s worst enemy is largely himself, believing that investors are hard-wired to perform poorly. Myopic loss aversion so drives investors that they sell too early and permanently lock in losses. He also refers to the stock market as “The Great Humiliator” as it unabashedly takes money from anyone, rich or poor, without discrimination. He has studied PE ratios and firmly believes they are utterly useless for investment analysis, a finding that John Neff would surely disagree with. However, he strongly advocates earnings yields in evaluating the stock market (taking the PE and flipping it) to determine whether it makes sense for companies to borrow money to buy back their own stock. Fisher believes in the American economy and also believes that the trade deficit is nothing to worry about. He believes an account deficit only indicates that the world thinks America is a better place to invest than any other.

When asked about his investment philosophy Fisher states:

“You’re not going to like what I’m going to tell you here. People have always believed that the kind of equity they invest in is superior to other kinds. ‘I’m a growth guy,’ ‘I’m a value guy,’ ‘I’m a small cap guy,’ ‘I’m an emerging markets guy.’ The fact of the matter is these people share a spiritual core with Osama Bin Laden. They’re narrow minded fanatics. And, they miss the big picture. In the long term all major categories of equity must have almost identical real risk adjusted returns. Because if you don’t believe that, you believe that a category of equity is more powerful than capitalism itself.”

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Oscar Wilde:

"When I was young I thought that money was the most important thing in life; now that I am old I know that it is."

Peter Lynch:

"You should invest in several stocks because out of every five you pick, one will be very great, one will be really bad, and three will be OK."

"There are substantial rewards for adopting a regular routine of investing and following it no matter what, and additional rewards for buying more shares when most investors are scared into selling."

"Your investor's edge is not something you get from Wall Street experts. It's something you already have. You can outperform the experts if you use your edge by investing in companies or industries you already understand."

"If you don't study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards."

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Jerry Seinfeld:

"I'm not an investor. People always tell me, you should have your money working for you. I've decided I'll do the work. I'm gonna let the money relax. You know what I mean? 'Cause you send your money out there - working for you - a lot of times, it gets fired. You go back there, 'What happened? I had my money. It was here, it was working for me.' 'Yeah, I remember your money. Showing up late. Taking time off. We had to let him go.'"

"Of course the market fluctuates. Everybody knows that. I just got fluctuated out of $4,000."

Charlie Munger:

"I think gold is a great thing to sew into your garments if you're a Jewish family in Vienna in 1939, but I think civilized people don't buy gold. They invest in productive businesses."

"All intelligent investing is value investing - acquiring more than you are paying for. You must value the business in order to value the stock."

"It’s not given to human beings to have such talent that they can just know everything about everything all the time. But it is given to human beings who work hard at it - who look and sift the world for a mispriced bet - that they can occasionally find one. And the wise ones bet heavily when the world offers them that opportunity. They bet big when they have the odds. And the rest of the time they don't. It's just that simple."

"If all you succeed in doing in life is getting rich by buying little pieces of paper, it's a failed life. Life is more than being shrewd in wealth accumulation."

"The best thing a human being can do is to help another human being know more"